Tax reform? Some say it hasn't even started

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The Government's claims that tax has been reformed have many
experts puzzled.Photo: Penny Bradfield

The Government's spirited claims to have completed the taxation
reform jigsaw are being challenged. Some tax and policy experts
argue that tax reform has yet to begin.

The tax laws run to about 10,000 pages and generate thousands of
accountancy jobs, while raising about $250 billion for the federal
coffers.

Yet, a simple, 10 per cent flat tax on all revenue would
generate the same money, according to IBISWorld chairman Phil
Ruthven. The Committee for Economic Development of Australia tax
summit produced a call for a major overhaul - and simplification -
of tax. Topping the reform agenda were an increased reliance on
consumption taxes, jettisoning bloated tax breaks and cutting
personal tax.

"To suggest that this (the recent budget) was a very, very
generous thing to the wealthy of Australia is just plain
ridiculous," Mr Ruthven said. "By international standards it is
hardly generous at all."

The speakers, including Vince FitzGerald, a former secretary of
the Department of Trade and the Department of Employment, Education
and Training, and Business Council of Australia policy director
Freya Marsden claimed tax reform might be difficult to sell
politically, but that economically it made sense.

Melbourne University economics professor John Freebairn, author
of a several books on taxation, supported the push.

The speakers said the central tenet of any reform must be to
move away from the format of punishing wealth creation towards an
approach of penalising spending.

Mr FitzGerald, Allen Consulting Group executive chairman and the
author of a celebrated 1993 study into national savings, said
before any simplification or flat tax rate could be introduced, the
Government would first have to get rid of tax breaks.

"One of the things that stands out about our income tax system
is that it is absolutely riddled with special tax breaks," Mr
FitzGerald said. "These tax breaks . . . add complexity to the
system. Our tax system has in a decade almost tripled in size and
this is when people are calling for simplification."

Up to $40 billion was outside the tax net because of the huge
number of special tax breaks. "The inefficiencies and unfairness of
many of the tax breaks are transparent," he said. "We need to get
our bloated tax act back to a few hundred pages."